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Post by pcups on Sept 17, 2008 22:57:24 GMT -4
Can you explain what the fuck is going on over there on Wallstreet? I know AIG almost fell through and stocks in Europe and Asia are falling as well. What the hell caused it? I thought we were going into a slow trend up ward. There was no terrorist attack, there was no comet!
Oh and Government bailing out AIG = 1 point for socialism.
*PUNCH* Take that Friedman!
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Post by boorules60 on Sept 17, 2008 23:50:36 GMT -4
Well Pat, would you like the pessimistic or optimistic version of our crisis? Well, I guess I might have time for both.
Background: The current "credit crisis" can not be attributed to one cause alone, although many people point the finger at the fall of the sub-prime market. Basically what this refers to is the collapse of the sub-prime of secondary mortgage market. When a person is denied a mortgage from a primary lender (like most banks), they will often try to receive one from a sub-prime lender, who have historically had higher interest rates because these borrowers pose a greater risk of foreclosure (inability pay back what they borrow so the bank takes their home as collateral). However, the United States has been marked by abnormally low interest rates for the last decade, the sub-prime lenders have been competing by offering low rate loans that do not properly reflect the risk that the borrower will not pay back. As a result, when these people do not pay back the money, both the borrower and lender lose out.
Furthermore, these low interest rates have artificially inflated the value of houses over the last five years. Because rates were so low, the demand for houses skyrocketed because so many people could afford loans/mortgages on their homes. This in turn increased the price of homes to record levels in 2006-7. However, when the sub-prime market collapsed in mid-2007, banks began to finally realize that they were in trouble and started making loans more difficult to get. This in turn reduced the demand for home and most homes began to LOSE value in 2007.
Imagine then that you got a mortgage for a home in 2004 for 500,000, even though you may have thought this was a good deal at the time since homes were so expensive, in 2008, your home might now be worth $400,000; you've just lost $100,000 in wealth and if you try to sell your home, you may not even be able to pay the remaining principle on your loan. That's bad... very bad.
Now, let's combine this fall of people's net worth with rising prices, especially in food and fuel which aren't included in CPI. Now let's add on the falling value of the dollar making imports more expensive as well and a credit market that's as tight as they've been in (impossible to get a loan). That's a great recipe for economic slowdown. People are spending less money because they are cutting back and/or only buy goods that are necessities. In turn, businesses are slowing down production and starting to lay people off and/or go under completely (look at Lehman Brothers, AIG, and Fannie/Freddie Mac for great examples). Because people are being laid off and losing their job, they are spending less than they would have anyway. Can you see the spiral coming yet?
As you might imagine, the first sector of the economy to take a hit after the mortgage market is the financial market since they are so dependent on credit, stocks, and confidence in order to operate. Since nearly every person and business in the economy is linked to a financial institution in some way, it doesn't take long for their struggles to reach the average American.
The government has done its best to try to bail out or save these financial institutions from failure, but as you might imagine, it's expensive and risky to do so. 75% of all mortgages are financed through Fannie Mae and Freddie Mac, so the collapse of either one would be disastrous. AIG insures many financial institutions across the country, so it's collapse could also send this market into further turmoil. The other problem we face is the fact that the government has been running budget deficits for 36 of the last 40 years. This means that if China and Japan (who hold nearly 50% of our debt in the form of government savings bonds) decide to cash in those loans, we could be royally... ROYALLY fucked since the national debt is currently $9.5 trillion dollars, almost as large as our yearly GDP.
So what does our future look like?
Optimistic Version: This crisis will probably take at least a year to straighten itself out so at best we can expect a moderate recession with little to no economic growth for at least a year.
Pessimistic Version: When was the last time the United States saw the banks/financial system collapse? The Great Depression. Seriously, I'm not joking.
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Post by pcups on Sept 18, 2008 0:10:36 GMT -4
Why the government step in? And why would China or Japan want to royally fuck the United States? Both economies would also fail. Fuck, the world would fail. Wasn't this thing supposed to bottom out in the near recession we had? Weren't things supposed to go UP. Now, we are talking about a depression? Damn.
And what about the World Bank? Isn't it supposed to help in THESE kind of situations. And don't banks have insurance for this kind of shit, so the economy doesn't destroy itself like it did back in the late 1920's?
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Post by d on Sept 18, 2008 6:36:39 GMT -4
The sub-prime mortgagaes were also varible rates. They would start out at a low teaser rate and then rise to a much higher rate. If the borrower paid it, the lender got a very high rate of return. If not, they got the property. How could they lose? If the borrower couldn't pay and the propertry wasn't worth what the loan was worth. The lender loses big time and many times. They're going down. Now the average good borrower can't borrow. He doesn't spend money on major items like cars, homes etc. Those parts of the economy fail. Their employees get laided off and can't buy other goods and services. Now everybody's involved.
No fear! "Our economy is fundamently sound!"
Where's Dubya been?
Us taxpayers bought an insurance company for 85 billion.
What a bunch of Whiners!
Shall I go on?
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Post by pcups on Sept 18, 2008 10:39:32 GMT -4
It seems a bunch of banks are just pumping money into the economy and it had a slight bump. A wise decision, now this will encourage people to invest instead of with drawl. Dubya has been trying to silence Gen Petraeus. The good General said "there is no victory in Iraq". I wonder how that would effect McCain's campaign? Oh by the way, they just replaced Gen. Petraeus, the only general who has had some success in Iraq. Oh and Pakistan told the U.S. it will go to war with them if they cross their boarders again. Bush has had his hands full.
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Post by d on Sept 18, 2008 14:17:58 GMT -4
I was curious about how many of you have arranged for absentee ballots. Anybody?
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Post by pcups on Sept 18, 2008 18:14:10 GMT -4
It's really easy at Keene, you just bring your student ID to the voting place and they register you on the spot.
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Post by d on Sept 18, 2008 18:51:35 GMT -4
GO PCUPS!
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Post by pcups on Sept 18, 2008 23:13:23 GMT -4
Did anyone see Tony Blaire on The Daily Show? That was funny.
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Post by boorules60 on Sept 19, 2008 0:22:58 GMT -4
Idiots that we can blame for this crisis:
5) The greedy sub-prime lenders who don't not how to properly price risk and are currently taking it in the ass for their inadequacies.
4) The retarded sub-prime borrowers who never had a fucking prayer of paying their load back in the first place and couldn't tell that houses were grossly overpriced.
3) AIG for not keeping enough money in their reserves to cover all the money they knew they'd have to pay... seriously they had a whole fucking year to see this coming and reacted about as well as Helen Keller would have reacted to an oncoming minivan.
2) George W. Bush for squandering the American tax dollars in Iraq rather than running surpluses which he should have been able to do for 6 of his 8 years as president, but I guess this is what we deserve for electing a shit head with an IQ so low that if you multiplied it by a hundred, you'd end up with his current approval rating.
And finally...
1) Let's throw in the fucking mindless lemmings in Congress who funded the wat but are more interested in sucking George's dick than working for the people who elected them in the first place.
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Post by pcups on Sept 19, 2008 1:21:23 GMT -4
Too bad this is how America normally works.
I'm going to start my own country. Americans and Europeans aren't allowed. Only Eskimos and Kenyans.
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Post by boorules60 on Sept 20, 2008 9:53:13 GMT -4
In the midst of all this shit, Maxwell gained almost three dollars this week bringing it up to $13.72 as of Friday afternoon, nearly its highest close in two years.
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Post by pcups on Sept 20, 2008 13:38:27 GMT -4
well didn't the entire market finish higher than when it started to fall?
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Post by pcups on Sept 22, 2008 10:09:24 GMT -4
Hey guys, I just read this interesting excerpt from a NY Times article. It says a lot about this country. (Just imagine for a moment if it were the black candidate in this election, rather than the white candidate, who was born in Central America, was an indifferent churchgoer, had graduated near the bottom of his university class, had dumped his first wife, had regularly displayed an explosive and profane temper, and had referred to the Pakistani-Iraqi border ...) The article is about how 15% of Americans think Obama is an Islam. More L O L. Also, for you non-geography buffs, Pakistan does not border Iraq. You can read the full article here: www.nytimes.com/2008/09/21/opinion/21kristof.html?_r=1&em&oref=sloginIt is very interesting.
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Post by punkybruster on Sept 22, 2008 14:45:38 GMT -4
"Obama is an Islam" - lol.
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